Best stocks to buy now
BTIG believes that certain inexpensive companies will raise as inflation pressures grow and the market stalls. According to Julian Emanuel, a managing director and chief equities and derivatives strategist at BTIG, “The U.S. economy is running hotter than the 33 cars (maximum speed, 239 MPH) during the Indianapolis 500.”
Core personal consumption expenditures (PCE) spending inflation jumped 3.1% in April compared to the expected 2.9% rise, according to the government’s Consumer Price Index (CPI). While maintaining a core PCE metric over 2% would result in the S&P 500 losing 1.6% every month on average, Emanuel said.
The firm looked for stocks with a low price-to-earnings ratio relative to their own track record that have historically outperformed the S&P 500 by 1% or more per month during periods when core PCE remained at or above 2%. These stocks have led their respective industry subsectors since Feb. 16 — the first time the 10-year Treasury yield has risen to its highest level in a year — but they are trailing in terms of 2021.
Take a look at these five “Checkered Flags” from BTIG.
The only household and personal product stock that meets BTIG’s criteria is Colgate-Palmolive. The company was also named to Goldman Sachs’ list of companies with strong pricing power that can typically withstand inflationary pressures.
Quest Diagnostics, which saw a surge in demand for Covid testing during the pandemic, is also on BTIG’s list. While shares of Quest Diagnostics have lagged since reopening trades, UBS upgraded the stock to buy in May, citing positive industry fundamentals.
SBA Communications isn’t just one of BTIG’s picks to outperform inflation. It also appeared on CNBC Pro’s list of stocks that outperformed the market during previous periods of inflation.
As investors continue to watch inflation, these BTIG names are inexpensive stocks that are well-positioned to outperform the market during periods of rising prices.
Morgan Stanley said that the market has been referred to as “de-rating,” meaning values are coming down since share prices have not changed in the wake of firms’ first-quarter earnings, which occurred at the height of monetary and fiscal stimulus. While the market has yet to experience another 15% decrease in price-to-earnings ratios, the bank predicts that the process is far from complete. Share prices are expected to decrease.
While the last year has seen “undoubtedly a wonderful thing,” rising profits are “nowhere near a surprise,” according to Morgan Stanley. There seems to be an unreasonable margin assumption baked into consensus predictions.
Furthermore, “while the results over the past year have been very much in line with our call for superior operating leverage coming out of this recession,” it said in the note, “we are now concerned that these results have been extrapolated in an overly optimistic manner.”
The bank went on to say that such adjustments are common and should be expected during midcycle transitions, and it cited a number of stocks that it expects to show earnings growth and trade at “attractive” enterprise value-to-sales ratios.
Among them are the wholesale food giant Sysco, industrial supply company W. W. Grainger, and auto parts retailer O’Reilly Auto Parts, as well as others in communication services, consumer discretionary companies, industrials, and technology.
Morgan Stanley also stated that inflation is a top priority for both corporations and consumers, claiming that price increases and supply constraints are out of control and may continue into 2022.
Large-cap growth companies had a significant jump in value last year, but they are now exhibiting a period of slower growth – which suggests that options traders have a buying opportunity, according to JPMorgan.
In a letter to clients, the business said that the link between growth and momentum is broken due to the current market reallocation away from growth toward value in the wake of a perception that a resumption of economic growth would result in rising inflation and interest rates.
“While our U.S. equity strategist remains Overweight Technology, downside risks for stocks triggering negative momentum signals may persist despite the NASDAQ 100‘s recent upswing. “We screen the NASDAQ 100 for stocks that are breaking or are about to break, below key momentum/technical signals while also carrying cheap implied volatility for tactical trade ideas,” according to the note.
Stocks on the list include Baidu and Skyworks, which have crossed all five thresholds, as well as Tesla and Okta, which have crossed four.
JPMorgan derivatives strategist Shawn Quigg recommended buying July puts on the stocks at strike prices that are 95% of the current trading price to capitalize on these trading patterns.
Puts are options that give the holder the right to sell the stock at a specified price in the future. In this case, if one of the stocks falls more than 5%, the put option allows the trader to sell it for a higher-than-market price. If the stock falls or rises by a smaller amount, the options trader is only liable for the premium paid to purchase the puts.
The four stocks mentioned above outperformed the broader market in 2020, with Okta increasing by more than 100% and Tesla increasing by more than 700%.
Only Skyworks has seen its stock price rise year to date. The semiconductor stock is up more than 11% in 2021, but it is down roughly 15% from its recent high in April.
The price of bitcoin fell to $30,000 per token, but according to JPMorgan, investors in institutions have so far held off from purchasing the plunge.
According to a paper released Tuesday by the bank, which gave an analysis of bitcoin’s short and long-term value, prices may drop much more before they settle after the correction.
It is currently believed that we will not see the volatility ratio reach the levels seen last summer by the end of 2018. Over the longer run, we could expect this volatility ratio to be about x4, according to analyst Nikolaos Panigirtzoglou.
Based on volatility ratios of bitcoin to gold, JPMorgan forecasts that bitcoin will trade between $24,000 and $36,000 in the medium term. Panigirtzoglou added that a full convergence of volatilities is unlikely in the near future.
The longer-term signal, on the other hand, remains “problematic.”
Panigirtzoglou wrote, “It has yet to turn short.” “Price declines to the $26,000 level would still be required before longer-term momentum would signal capitulation.”
On Tuesday, bitcoin fell by about 1.5 percent to around $36,175.
According to the note, short-term momentum signals for ether — the native token of the Ethereum blockchain that powers smart contracts, NFTs, and stablecoins — have declined, but there is nothing to suggest positions have been fully unwound. Despite this, the firm believes that ether prices could fall to $2,000 in the short term and $1,000 in the long term.
The rise in bitcoin’s notorious price volatility, according to Panigirtzoglou, could stymie further institutional adoption by challenging valuation and making it less appealing in institutional portfolios than “traditional” gold. According to JPMorgan, institutional money has been flowing out of CME bitcoin futures and other regulated bitcoin funds and into gold electronic trading funds since the crash.